Social Security

By Grundmann, Herman; Lingg, Barbara et al. | Social Security Bulletin, January 1, 1994 | Go to article overview

Social Security

Grundmann, Herman, Lingg, Barbara, Diez, Greg, Bondar, Joseph, Social Security Bulletin

Program Summary

The Old-Age, Survivors, and disability Insurance (OASDI) program provides monthly benefits to retired and disabled workers and their dependents and to survivors of insured workers. Benefits are paid as a matter of earned right to workers who gain insured status and to their eligible spouses and children and survivors. Retirement benefits were provided by the original Social Security Act of 1935, benefits for dependents and survivors by the 1939 amendments, benefits for the disabled by the 1956 amendments, and benefits for the dependents of disabled workers by the 1958 amendments. In 1965, the Health Insurance program, generally known as Medicare, was enacted. Medicare is administered by the Health Care Financing Administration.

A person builds protection under the OASDI program through work in employment covered under Social Security. Coverage is in general compulsory. Taxes on wage and salary workers' earnings up to a statutory maximum taxable amount each year are withheld and matched by employers. Self-employed persons pay taxes on their annual earnings up to the same maximum as employees but at the combined employer-employee rate. However, special tax deduction provisions apply that are designed to treat the self-employed in much the same manner as employers and employees are treated for purposes of Social Security and income taxes. While taxes of workers with more than one employer are withheld and matched up to the annual maximum by each employer, the employee's share of taxes on total wages above the maximum is refundable through the income tax system. All taxes are credited to the OASI and DI Trust Funds, which by law may be used only to meet the cost of: (1) Monthly benefits when the worker retires, dies, or becomes disabled; (2) lump-sum death payments to survivors; (3) vocational rehabilitation services for disability beneficiaries; and (4) administrative expenses.

Benefits are financed principally through contributions from employers, employees, and the self-employed. The trust funds also receive income from: interest on investments of trust fund assets in securities issued or guaranteed by the U.S. Government; Federal general revenues to finance the cost of benefits attributable to military and other gratuitous wage credits and "special age-72" benefits; and revenues resulting from the inclusion of part of Social Security benefits, under provisions of the 1983 amendments, in adjusted gross income for Federal income tax purposes. The OASDI program is administered by the Social Security Administration.

Provisions for Railroad Retirement beneficiaries.--The OASDI tabulations do not include a number of Railroad Retirement beneficiaries who would have been eligible for Social Security benefits had they applied. The reason they have not applied is that receipt of a Social Security benefit would reduce their Railroad Retirement benefit by a like amount.

The Railroad Retirement Act of 1974, effective January 1, 1975, provided that the regular annuity for employees with 10 or more years of railroad service who retired after December 31, 1974, will consist of two components:

Tier 1--A basic Social Security level component equivalent to what would be paid under the Social Security Act on the basis of the employee's combined railroad and nonrailroad service, reduced by the amount of any monthly benefit under OASDI actually paid on the basis of nonrailroad work; and

Tier 2--A staff level component payable over and above the Social Security equivalent, on the basis of a formula applicable only to railroad service.

History of Provisions

The number of Railroad Retirement beneficiaries who would be eligible for a Social Security benefit if they applied is not available. It is estimated to be less than 100,000.

Pages 20-68 describe the history and current provisions of the Social Security program. In the tables, the word "Act" refers to legislation enacted in the year shown (except that the 1967 Act was signed January 2, 1968); 1972a denotes legislation of July 1; 1972b denotes legislation of October 30; 1973a denotes legislation of July 9; 1973b denotes legislation of December 31; 1981a denotes legislation of August 13; and 1981b denotes legislation of December 29.

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Social Security


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